Nandini Sen Gupta &
Aparna Ramalingam, TNN
CHENNAI:
In an effort to grow their lending book, many banks are now offering lower
interest rate on personal loans.
With the slump in auto sales continuing and certain real estate markets showing
signs of sluggishness coupled with corporates shying away from major expansion,
banks are looking at new segments for growth
Said Sumit Bali, executive vice president, Kotak Mahindra Bank: "Due to the slowdown in cor.porate lending, there's pressure to increase the book on the retail side as ticket sizes are small and delinquencies are less. Banks are targeting select few 'good' customers from its existing base for personal loans at aggressive rates." Kotak also offers such schemes for its 'good profile' customers where rates can go down to 13.5-13.25%.
The personal consumption segment is holding up despite the slowdown - a comeback after the 2008-09 when unsecured loans had completely skewed the market and many lenders burnt their fingers. "Since then the lenders have wizened up and there are many more firewalls to prevent a repeat," said Bali. "And the personal consumption segment - home loans, car loans, personal loans and credit cards - is doing well even in the slowdown. There is not too much stress of delinquency." The risk factor becomes even lower when the loan is offered to a preferred customer with whom the bank already has a relationship in the form of another loan or a long-standing account and whose credit history is impeccable. Hence the lower rates, say sources.
Said Sumit Bali, executive vice president, Kotak Mahindra Bank: "Due to the slowdown in cor.porate lending, there's pressure to increase the book on the retail side as ticket sizes are small and delinquencies are less. Banks are targeting select few 'good' customers from its existing base for personal loans at aggressive rates." Kotak also offers such schemes for its 'good profile' customers where rates can go down to 13.5-13.25%.
The personal consumption segment is holding up despite the slowdown - a comeback after the 2008-09 when unsecured loans had completely skewed the market and many lenders burnt their fingers. "Since then the lenders have wizened up and there are many more firewalls to prevent a repeat," said Bali. "And the personal consumption segment - home loans, car loans, personal loans and credit cards - is doing well even in the slowdown. There is not too much stress of delinquency." The risk factor becomes even lower when the loan is offered to a preferred customer with whom the bank already has a relationship in the form of another loan or a long-standing account and whose credit history is impeccable. Hence the lower rates, say sources.
Sometime back, HDFC Bank too sent mailers to its elite customers
with attractive offers on personal
loans. Accordingly, those who have a take home monthly salary of over Rs
75,000 per month can avail a minimum loan of Rs 10 lakh at reduced interest
rates ranging between 12.99% and 14% per annum on a reducing basis. The bank's
personal loan portfolio grew by 26% to touch Rs 17,500 crore during 2012-13 as
compared to Rs 13,891 crore during 2011-12. This has now moved up to Rs 19,314
crore as at September end of this fiscal.
Some others like Federal Bank are offering overdraft facilities to salaried account holders at an interest rate of 12.55%. "Under this scheme, the interest rate is just two per cent above our base rate (10.55%) which itself is very competitive from the industry stand point," A Surendran, general manager and head (retail), Federal Bank said. Such customers can avail overdraft limits up to six times of their monthly salary.
Last month, as part of its festive offer scheme, Indian Overseas Bank slashed its interest rate on consumer loans (mainly for purchase of durable and white goods) by 200 basis points to 13.5% from 15.5%. This interest rate offer is on till end of January next year. "The whole idea was to revive consumer spending in certain categories," M Narendra, chairman and managing director, Indian Overseas Bank said.
Some others like Karur Vysya Bank are not going in for a revision immediately. "Personal loan segment is still a high risk area. This segment also entails high cost of servicing in terms of repayment and loan recovery. Some growth in the loan book could be achieved by managing the cost of funds and yields," K Venkataraman, managing director and chief executive officer, Karur Vysya Bank said. "We are not looking to reduce rates immediately," he added.
Some others like Federal Bank are offering overdraft facilities to salaried account holders at an interest rate of 12.55%. "Under this scheme, the interest rate is just two per cent above our base rate (10.55%) which itself is very competitive from the industry stand point," A Surendran, general manager and head (retail), Federal Bank said. Such customers can avail overdraft limits up to six times of their monthly salary.
Last month, as part of its festive offer scheme, Indian Overseas Bank slashed its interest rate on consumer loans (mainly for purchase of durable and white goods) by 200 basis points to 13.5% from 15.5%. This interest rate offer is on till end of January next year. "The whole idea was to revive consumer spending in certain categories," M Narendra, chairman and managing director, Indian Overseas Bank said.
Some others like Karur Vysya Bank are not going in for a revision immediately. "Personal loan segment is still a high risk area. This segment also entails high cost of servicing in terms of repayment and loan recovery. Some growth in the loan book could be achieved by managing the cost of funds and yields," K Venkataraman, managing director and chief executive officer, Karur Vysya Bank said. "We are not looking to reduce rates immediately," he added.
Key Word: Personal loan in Chennai.
